Method and system for providing employer-sponsored retirement plan

• US 20070033124A1
• Filed: 07/18/2006
• Published: 02/08/2007
• Est. Priority Date: 07/19/2005
• Status: Active Grant

• Current Assignee: Lincoln National Life Insurance Company (Lincoln National Corporation)
• Original Assignee: Lincoln National Life Insurance Company (Lincoln National Corporation)
• Inventors: Toth, Robert, Herr, Daniel
• Granted Patent: US 8,429,052 B2
• Time in Patent Office: Days
• US Class Current: 705/35
• CPC Class Codes: G06Q 10/1057 Benefits or employee welfare, e.g. insurance, holiday or retirement packages
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A method of administering income distributions from an employer-sponsored retirement plan having a participant account value comprises providing an option to a plan participant to elect lifetime payout funded by at least a portion of the participant'"'"'s account value; providing an option to the participant to elect an excess period during which a participant maintains control over the portion of the account value; transferring the portion of the participant'"'"'s account value into a group annuity contract; determining an initial benefit payment under the terms of the group annuity contract; determining a subsequent benefit payment; and paying the initial and subsequent payments to the participant. Other embodiments include one or more of these, and the step of determining a charge to be paid by the participant for the guaranteed lifetime payout.

Claims

1. A method of administering income distributions from an employer-sponsored retirement plan having a participant account value, comprising the steps of:

providing an option to a plan participant to elect a lifetime payout funded by at least a portion of the participant'"'"'s account value;

providing an option to the participant to elect an access period during which the participant maintains control over said portion of the participant'"'"'s account value;

transferring said portion of the participant'"'"'s account value into a group annuity contract;

determining an initial benefit payment under the terms of the group annuity contract;

determining a subsequent benefit payment; and

paying the initial and subsequent benefit payments to the participant.

2. The method of claim 1, wherein the participant'"'"'s control over said portion of the participant'"'"'s account value during the access period is governed by pre-existing plan rules.

3. The method of claim 2, wherein the participant'"'"'s control over said portion of the participant'"'"'s account value during the access period includes at least one of the right to withdraw funds, the right to direct investments, and the right to make deposits.

4. The method of claim 1, wherein the initial and subsequent benefit payments are paid to the participant through existing plan processes.

5. The method of claim 1, wherein the initial benefit, per $1,000 of account value, is determined by the following factor:

$\mathrm{AnnuityFactor}=\frac{1<br><br>\text{,}<br><br>000}{\stackrel{\mathrm{¨<br><br>}}{a}<br><br>\text{\hspace{1em}<br><br>}<br><br>\frac{\left(m\right)}{\mathrm{AP}}<br><br>\text{\hspace{1em}<br><br>}+\text{\hspace{1em}<br><br>}<br><br>\frac{v^{\mathrm{AP}}}{\left(1<br><br>\text{\hspace{1em}<br><br>}-\text{\hspace{1em}<br><br>}<br><br>\mathrm{PT}\right)*\left(1<br><br>\text{\hspace{1em}<br><br>}-\text{\hspace{1em}<br><br>}<br><br>\mathrm{ExpLoad}\right)}*\text{\hspace{1em}<br><br>}<br><br>{\stackrel{\mathrm{¨<br><br>}}{a}}_{x<br><br>\text{\hspace{1em}<br><br>}+\text{\hspace{1em}<br><br>}<br><br>\mathrm{AP}}^{\left(m\right)}}$

where;

m is the frequency of benefit payments,

ExpLoad is the provision for expenses,

x is the participant'"'"'s age when the benefit payments begin,

PT is any premium tax, and

AP is the length of the annuity certain period

v is the discount factor for length of the access period

6. The method of claim 1, wherein the subsequent benefit payment is determined for each calendar year by the following formula:

$\mathrm{Subsequent}<br><br>\text{\hspace{1em}<br><br>}<br><br>\mathrm{Benefit}<br><br>\text{\hspace{1em}<br><br>}<br><br>\mathrm{Payment}=\frac{\mathrm{CurrentAccountvalue}<br><br>\text{\hspace{1em}<br><br>}}{\stackrel{\mathrm{¨<br><br>}}{a}<br><br>\text{\hspace{1em}<br><br>}<br><br>\frac{\left(m\right)}{\mathrm{AP}<br><br>\text{\hspace{1em}<br><br>}-\text{\hspace{1em}<br><br>}<br><br>r}<br><br>\text{\hspace{1em}<br><br>}+\text{\hspace{1em}<br><br>}<br><br>\frac{v^{\mathrm{AP}<br><br>\text{\hspace{1em}<br><br>}-\text{\hspace{1em}<br><br>}<br><br>r}}{\left(1<br><br>\text{\hspace{1em}<br><br>}-\text{\hspace{1em}<br><br>}<br><br>\mathrm{PT}\right)*\left(1<br><br>\text{\hspace{1em}<br><br>}-\text{\hspace{1em}<br><br>}<br><br>\mathrm{ExpLoad}\right)}*\text{\hspace{1em}<br><br>}<br><br>{\stackrel{\mathrm{¨<br><br>}}{a}}_{x<br><br>\text{\hspace{1em}<br><br>}+\text{\hspace{1em}<br><br>}<br><br>\mathrm{AP}}^{\left(m\right)}}$

where;

m is the frequency of benefit payments,

ExpLoad is the provision for expenses,

x is the participant'"'"'s age when the benefit payments begin,

PT is any premium tax, and

AP is the length of the annuity certain period

v is the discount factor for length of the access period

r is the number of payment periods elapsed since the benefit start date

7. The method of claim 1, further comprising the steps of determining a total of benefit payments made in a calendar year and comparing the total to a minimum required annual distribution amount to insure that the total is at least equal to the required minimum amount.

8. The method of claim 1, wherein benefit payments are made monthly and wherein benefit payments for a remainder of the calendar year which includes a benefit start date are set equal to the initial benefit payment.

9. The method of claim 1, wherein the subsequent benefit payment is determined annually and paid monthly, and wherein monthly payments following determination are equal.

10. The method of claim 1, wherein the subsequent benefit payment is determined and paid monthly.

11. The method of claim 1, further comprising the step of providing a death benefit, based on participant'"'"'s account value, to be paid if participant dies during a period in which an account value is available.

12. The method of claim 1, further comprising the step of providing a joint life distribution option which may be elected by the participant, and providing at least one of a lump sum death benefit and payment of lifetime benefits to a designated beneficiary upon death of the participant.

13. The method of claim 1, further comprising the step of providing a minimum benefit payment guarantee to ensure that subsequent benefit payments will not fall below a predetermined level.

14. The method of claim 1, wherein at least one of the initial benefit payment and the subsequent benefit payment is made from a Plan Distributed Annuity.

15. A method of administering distributions from an employer-sponsored, defined contribution retirement plan having participant account balances, comprising the steps of:

providing an option to a plan participant to elect a lifetime payout funded by at least a portion of the participant'"'"'s account balance;

establishing an account within the plan for paying periodic guaranteed distributions to the participant in response to the election of a lifetime payout;

determining a charge to be paid by the participant for the guaranteed lifetime payout;

determining an amount of the guaranteed distributions and subsequently paying the distributions to the participant.

16. The method of claim 15, further comprising the step of deducting the charge from the participant'"'"'s account balance.

17. The method of claim 15, wherein the step of determining a charge comprises determining a front end charge and deducting the front end charge from the participant'"'"'s account balance.

18. The method of claim 15, wherein the step of determining a charge comprises determining a charge to be deducted from each distribution paid to the participant.

19. The method of claim 15, wherein the step of determining a charge comprises the step of determining an asset charge and periodically deducting the asset charge from the participant'"'"'s account balance.

20. The method of claim 15, wherein the step of establishing an account within the plan comprises the step of establishing a plan distributed annuity to fund the guaranteed lifetime distributions.

21. The method of claim 15, wherein the step of establishing an account within the plan comprises the step of establishing a variable annuity account to fund the guaranteed lifetime distributions.

22. The method of claim 21, wherein the step of establishing a variable annuity account comprises the steps of maintaining an account value for a defined period of time, and providing the plan participant access to the account value.

23. The method of claim 22, wherein the step of providing the plan participant access to the account value comprises the steps of permitting at least one of withdrawals from and additional deposits to the variable annuity account, and making appropriate adjustments to the account value based on said withdrawals and deposits.

24. The method of claim 23, comprising the additional step of establishing a predetermined withdrawal rate for a given withdrawal frequency, and providing a guarantee of continued distributions, provided that withdrawals do not exceed the predetermined withdrawal rate, even if the account value is exhausted.

25. The method of claim 24, comprising the additional step of providing at least one of a death benefit and a commuted value.

26. The method of claim 25, wherein the death benefit is equal to the account value.

27. The method of claim 25, wherein the commuted value is equal to the account value less a commutation charge.

28. The method of claim 21, further comprising the step of providing a minimum payment guarantee.

29. The method of claim 15, further comprising the step of permitting the plan participant to select investment options for said portion of the participant'"'"'s account balance.

30. The method of claim 29, wherein said investment options include the same, or similar, options available to the plan participant in an accumulation period under the employer-sponsored, defined contribution retirement plan.

31. The method of claim 15, further comprising the step of providing a long term care benefit, the costs of which are deducted from the participant'"'"'s account balance.

32. The method of claim 15, further comprising the step of providing a guaranteed minimum payment benefit under the lifetime payout so that periodic benefit payments will not be less than a specified amount.

33. The method of claim 15, further comprising the steps of providing funding and administration of benefits under the lifetime payout outside of an annuity contract during a first specified period.

34. The method of claim 15, further comprising the steps of identifying Internal Revenue Code requirements applicable to the employer-sponsored, defined contribution retirement plan, and administering distributions under the lifetime payout option so as to ensure compliance with said regulations.

35. The method of claim 15, further comprising the step of creating a record of payments made under the lifetime payout option as part of a record keeping process used to record other forms of distributions from the employer-sponsored, defined contribution retirement plan.

36. The method of claim 15, further comprising the steps of periodically computing benefits under the lifetime payout option, and reporting the results of the computation to the plan participant.

37. The method of claim 36, wherein said results are reported to the participant through pre-existing plan processes.

38. The method of claim 15, further comprising the steps of providing data relating to the lifetime payout option to pre-existing plan administration processes, including at least one of processes relating to plan termination, plan mergers, changes in plan administrators, changes in investment options, changes in insurance vendors and plan amendments.

39. A computer system for administering income distributions from an employer-sponsored retirement plan having a participant account balance, comprising:

means for providing an option to a plan participant to elect a lifetime payout funded by at least a portion of the participant'"'"'s account balance;

means for establishing an account within the plan for paying periodic guaranteed distributions to the participant in response to the election of a lifetime payout; and

means for determining a charge to be paid by the participant for the guaranteed lifetime payout.

40. The computer system of claim 39, wherein said means for establishing an account within the plan comprises means for establishing a variable annuity account to fund the guaranteed lifetime distributions.

41. The computer system of claim 40, wherein said means for establishing a variable annuity account comprises means for maintaining an account value for a defined period of time, and means for providing the plan participant access to the account value.

42. The computer system of claim 41, wherein said means for providing the plan participant access to the account value comprises means for permitting at least one of withdrawals from and additional deposits to the variable annuity account, and means for making appropriate adjustments to the account value based on said withdrawals and deposits.

43. The computer system of claim 42, further comprising means for establishing a predetermined withdrawal rate for a given withdrawal frequency, and means for providing a guarantee of continued distributions, provided that withdrawals do not exceed the predetermined withdrawal rate, even if the account value is exhausted.

44. The computer system of claim 39, further comprising means for permitting the plan participant to select investment options for said portion of the participant'"'"'s account balance.

45. The computer system of claim 44, wherein said investment options include the same, or similar, options available to the plan participant in an accumulation period under the employer-sponsored, defined contribution retirement plan.

46. The computer system of claim 39, further comprising means for providing a guaranteed minimum payment benefit under the lifetime payout so that periodic benefit payments will not be less than a specified amount.

47. The computer system of claim 39, further comprising means for providing funding and administration of benefits under the lifetime payout outside of an annuity contract during a first specified period.

48. The computer system of claim 39, further comprising means for identifying Internal Revenue Code requirements applicable to the employer-sponsored, defined contribution retirement plan, and means for administering distributions under the lifetime payout option so as to ensure compliance with said regulations.

49. The computer system of claim 39, further comprising means for creating a record of payments made under the lifetime payout option as part of a record keeping process used to record other forms of distributions from the employer-sponsored, defined contribution retirement plan.

50. The computer system of claim 39, further comprising means for periodically computing benefits under the lifetime payout option, and reporting the results of the computation to the plan participant.

51. The computer system of claim 50, wherein said results are reported to the participant through pre-existing plan processes.

52. The computer system of claim 39, further comprising means for providing data relating to the lifetime payout option to pre-existing plan administration processes, including at least one of processes relating to plan termination, plan mergers, changes in plan administrators, changes in investment options, changes in insurance vendors and plan amendments.